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A: Here's all you need to know: A Professional
Employer Organization (PEO) is one of the best-kept secrets of
many successful small businesses. Essentially, these bodies
handle all your HR needs, including payroll and administration,
employee health and retirement benefits, workers' compensation
insurance, state and federal compliance issues and even worker
training.

All you're left to do is hire, supervise and promote (or fire)
your employees as needed. Of course there is a cost for
contracting out your HR department, but consider this list of
positives.

PEOs manage thousands of employees and can therefore purchase
insurance and benefit plans at a significant savings or allow you
to offer higher-quality plans to attract and retain skilled
employees.

Experienced professionals in HR, benefits, payroll, risk
management and other aspects of employee administration are on
the job. Want to institute a 401(k) plan or flexible spending
account? The PEO will do it. No need for you to figure it out
yourself.

The PEO will provide HR manuals for your employees, and the
policies and procedures will be maintained in compliance with
ever-changing state and federal laws and regulations.

A PEO will help with employment-related regulatory compliance
(ADA, payroll, OSHA, EEOC, etc.), a huge advantage that can be
worth more to your business than the money saved on benefits
costs.

If you have an HR-related employee claim, such as a
discrimination allegation, a PEO will know what to do and will
take the lead on managing the claim process.

Ordinarily the savings on group health and benefit plans alone
will more or less outweigh the cost of hiring a PEO to tackle
these duties. But don't forget the peace of mind that a PEO
offers. Take one of my fast-growing clients: When this team
opened a new office in a distant state, they had no clue how to
administer payroll there. When I came onboard, we hired a
national PEO that was able to make the process of opening offices
and hiring employees in other states painless and risk-free.

The most important bit of advice when it comes to hiring a PEO:
Do your due diligence. You want your PEO to be financially
responsible and stable. The best are accredited by the Employer
Services Assurance Corporation and have a current Statement on
Standards for Attestation Engagements No. 16 audit (formerly
known as an SAS 70). Make sure they have a deep presence in your
industry, and get references.

As to knowing when your business could use a PEO, I believe it's
the moment your accounting department asks for a dedicated HR
person (even a part-time one) to handle all the paperwork. The
sooner they can offload that work to someone who really knows
what they're doing and return to managing your balance sheet, the
better.